Barclays loses faith in Africa?
Barclays Africa Group Limited, which includes the South African branch network Absa, is listed on the Johannesburg stock exchange and is 62 % owned by the UK bank. It is one of the largest banks on the continent, with a SAR991bn balance sheet, more than 40,000 staff and 1,267 branches across 12 countries.
Who could blame them for leaving?…
I assumed Barclays had big plans as they were in discussions of rebranding the Absa branch network in South Africa under its own colours after increasing its stake in the Johannesburg-listed business. Barclays business in Africa accounts for 20% of the British banks earnings and has actually been growing.
So why does it want to sell its 62% stake in South Africa’s ABSA bank and essentially pull out of Africa within the next three years?
Jes Staley, Barclays new CEO, notes that to rethink the business and forced him to ways to cut costs and raise capital for its flagging investment business.
Staley, as part of the banks annual results announcement, said going forward the bank will focus on two divisions: Barclays UK and Barclays Corporate and International.
However I believe that the real reason for this response was due to Jacob Zuma, President of South Africa who recently changed his finance minister three times in less than a week. Such a move at a time when the country’s economy is under-performing has hit the confidence levels of investors in the country.
Another reason is the devaluation of the South African rand against the British pound which has reduced the recent contribution of the African business to the overall banking group’s profits. For 2014, Barclay’s earned a return on equity of 9.3% from its African operations which was lower than its target of 11%.